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RESIDENTIAL PROPERTY | Kiersnerr Gerwin Tacadena, Singapore

Published: 31 May 17

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Singapore's foreign workers face bed crunch under new rental laws

Occupancy cap was slashed to six.

Subdividing apartments into small sublets has been a mainstay of the cheaper end of the housing market in Singapore, but has drawn the ire of neighbours who are faced with a lot of people crammed next door. To alleviate overcrowding in apartments, the Urban Redevelopment Authority (URA) decided to reduce the maximum occupancy in private dwellings from eight to six unrelated people effective May 15. Apart from reducing the demand for bunk beds in Singapore, will this have an effect on rents and how hard will it be to enforce?

ERA Realty Network key executive officer Eugene Lim notes there has been an oversupply situation in the private residential leasing market over the last two years due to the large number of newly completed projects as well as the restructuring of the economy to become less reliant on foreign manpower. SRX Property estimates 3,653 non-landed Private Residential units were rented in April 2017, representing an 18.7% decrease from 4,493 units rented in March 2017. On a yearly basis, rental volume in April 2017 was 15.8% lower than 4,336 units rented in April 2016.

The decrease in rental volumes could be due to landlords subletting individual rooms within their units instead of renting out whole units. “Some of them have installed internal partitioning to create more rooms. There could be instances whereby a 3-bedroom apartment could evolve into a 6-8 bedroom apartment,” Lim explained.

Another scenario could be the landlord renting out his whole apartment to a company to house their workers. “To save costs, these companies could have packed as many occupants as they can into the apartment; especially if they work on shifts,” he said.

JLL Singapore head of residential leasing Juliann Teo said this move by the government is to ensure that the players do not churn out nano-apartments as they do in uber-expensive Hong Kong.

“Over the years, the size of residential properties is trending smaller. The slash on occupancy cap is likely to ensure that overcrowding and its associated hazards do not become a norm,” Teo explained, noting that this will also spur take up for smaller studio unit-types and one-bedroom apartments. Teo added demand for private properties may likely see an increase and could perhaps uplift rents, given that from a mathematical perspective, those housing units with eight occupants would have to displace two to keep up with the limit.

Landlords with five-bedroom units would have to rent out their properties to families as they are not affected by the occupancy cap. “It is a good move in view that the rental market environment is seeing an oversupply and “desperate” landlords rent out rooms instead of the whole unit,” ERA’s Lim argued.

PropNex Realty CEO Ismail Gafoor noted that the recently-imposed cap of six is a reasonable number, taking into consideration the smaller sizes of condominiums in recent years due to the quantum involved.

“In fact, in our opinion, this limit of the number of tenants has its advantages. Private properties are meant to be exclusive, with owners of the development having the quiet enjoyment of the facilities and lifestyle offered. In order to maintain this exclusivity, the cap of six tenants is reasonable to begin with,” he said.

Policing the policy changes may prove challenging, but the squeeze on landlords has begun and for tenants they will get to enjoy more space.